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22 Oct 2019

Real Estate and Construction

The reduction in transaction fees for property sector helps boost the market amid various challenging issues (Current Issue No.3044)

              Since the beginning of 2019, the residential property market has faced several challenges due to a slowing economy, which affects the confidence of buyers. Moreover, the purchasing power of consumers has not fully recovered. The loan-to-value (LTV) ratio requirement, designed to control the mortgage quality in the system, and accumulated unsold inventory covering various price levels, have prompted property developers to launch a series of marketing campaigns to energize the market since the beginning of this year. Moreover, the government has issued various stimulus measures to boost the real estate market such as the fee reduction for property transactions and tax waivers for first-home buyers to help people wishing to own their first home and low-income earners. Nonetheless, the property market indicators in the Bangkok Metropolitan Region state that the property market is still experiencing a slowdown.  Because of the grim outlook, the government, on October 22, announced additional measures to boost the property sector by reducing transaction fees for residential property transactions to keep the momentum of the marketing going.

             Additional measures are: Firstly, the ceiling for fee reduction for a residential property transaction is increased to 3 million Baht from 1 million Baht. Secondly, 50 billion Baht worth of low-interest loans will be granted through state-run specialized banks for home purchases (both new and pre-owned residential units) and renovation.

                ​KResearch views that the ceiling adjustment will not only expand the consumer base but also enable the property developers to release their unsold property units, priced below 3 million Baht, which currently represent 54 percent of the total outstanding units in the Bangkok Metropolitan Region.  These additional measures may not do much to change consumers' cautious outlook toward the residential property market in the remainder of 2019. Nonetheless, it may help increase ownership transfers in 2019 from 121,730 units (Jan-Aug. 2019) to the upper end of our projection that was made in the middle of this year at 177,000 units or a contraction of 10 percent from 2018.